Ottawa rejects Higgs's carbon tax 'deferral' idea for bringing down gas costs

By proposing to suspend the provincial carbon tax for three months to help consumers cope with soaring gas prices, Premier Blaine Higgs may be choosing themost complicated of several options.

Higgs said a "deferral" of the carbon tax would take 11 cents off the cost of a litre of gasoline.

But it's a change that would require the federal government's approval, since by law it's Ottawa that sets the rate, and that approval isn't coming.

Federal Intergovernmental Affairs Minister Dominic LeBlanc told CBC News the federal carbon pricing standard will stay the same and increase as scheduled at the end of this month.

"We have no intention of changing the planned increase to take effect on April 1," he said.

He said while Ottawa establishes the rate, the Higgs government designed its provincial systems and has the flexibility to return more of that money to consumers.

"The New Brunswick government has a whole series of tools on its own to decide if it wants to do something about the price at the pump, but the federal carbon price increase will go ahead as planned."

University of Calgary economist Trevor Tombe says the province should use other tools because a carbon tax cut is not the best way to give consumers a break.

He said it's better to simply send people cheques, allowing the province to target those who need the help most if it chooses to.

"The increase in the price of gasoline is a strain on some families and not others, and more targeted approachesto ensure that those who need to support get itmay be much more effective for governments to pursue," he said.

The price of a litre of regular unleaded gasoline was hovering around $1.80 in New Brunswick on Wednesday morning, with much of the recent increase attributed to the invasion of Ukraine by Russia, a major oil exporter now being hit by sanctions.

Higgstold CBC News Tuesday he plans to speak to his fellow premiers Thursday about a deferral of the carbon tax that would save people 11 cents a litre.

The current rate is 8.8 cents a litre but it's due to increase to 11 cents on April 1.

Suspending the provincial gasoline tax, which is 10.9 cents per litre, would produce almost exactly the same savings for drivers at the pumps.

Opposition Liberal Leader Roger Melanson said that's what Higgs should opt for because he can do it "right now" without having to get federal approval.

"The carbon tax is certainly not under New Brunswick's sole control, and it's a lot more complicated to be achieved."

Melanson saidHiggs is focusing on carbon taxes to try to avoid his own responsibility to help New Brunswickers, but "there's other ways, provincially, under the premier's control to be able to ease some of this pain at the pump."

Prince Edward Island announced Tuesday it will start rebating part of its carbon tax on April 1, and Nova Scotia said this week it will look at reducing the provincial gas tax.

Alberta announced this week it's suspending its provincial gas tax completely and also providing ratepayers in the province a $150 rebate on their electricity bills.

But Higgs points out the spike in oil prices means Alberta is awash in royalty revenue and can afford that move "many times over," while New Brunswick cannot.

"It's a very different situation," he said.

In rejecting a provincial gas tax cut, Higgs also dropped some hints about the upcoming provincial budget on March 22.

He suggested there'll be major spending increases to address "many of the concerns that people are having" in areas such as health care, education, social assistance and "controlling the high cost of rent."

Higgs seesshrinking surplus

The new spending will shrink this year's projected $487.8 million surplus down to a "very slim" $50 million to $100 million, he said, which makes a gas tax cut impossible.

"We're running very, very close to the wire," Higgs said.

"The budget is laid out and obviously the revenue stream that goes directly into that is what supports all those projects, so it's difficult to have one without the other."

Melanson said New Brunswickers can't take the premier's word for that because of two straight years of larger than expected surpluses.

"Who can trust the premier's budget? No one. No one can trust what the premier's going to table on March 22 in terms of numbers."

The gas tax was projected to bring in $202.5 million this year, while the carbon tax was forecast to collect $163 million, with $36 million of the total going to climate change projects.

Last year Higgs used some of the remaining $127 million in carbon tax revenue to pay for a small income tax cut.

Economist favours rebate

Higgs could quickly cut income taxes further as another way to help New Brunswickers cope with rising costs.

But Tombe saidthat's not as efficient as a rebate because an income tax cut wouldn't help low-income people already below the threshold for paying income taxes.

"I'm thinking of direct cash transfers, literally writing a cheque."

The rebate could be processed through a tax credit that the province could make available when New Brunswickers file their tax returns this year.

Melanson saidanother argument against a carbon tax cut is that "climate change isn't going away" and still needs to be addressed.

But Higgs argued Tuesday the Russia spike will achieve the same objective: to give people a financial incentive to change their behaviour and lower their consumption of fossil fuels.

The carbon tax "was there to offset consumption with higher prices," he said. "Well, we're certainly seeing that right now."

But Tombe said a sudden spike in gas prices caused by world events doesn't alter consumer behaviour the same way a carbon tax does.

Research shows that consumers change their behaviour in response to a carbon tax because it's a long-term measure that increases slowly, over time, and serves as a reminder about climate change, he said.

Temporarily reducing it because of the Russia spike may not lead to the same results.

"At some point there's going to be a reduction in the world price of oil," he said. "It goes up and down and we're used to that, so we respond to temporary spikes differently that permanent changes."

A one-time rebate "is better in that it's not affecting the operation of gasoline markets. It's not affecting market prices. It's supporting families without changing prices."

LeBlanc said business groups have told the federal government they prefer a stable, predictable carbon price because it allows them to do better long-term planning for reducing emissions.